Economy

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TOKYO (Reuters) – The dollar climbed to a two-week top against the euro on Monday as traders pared bets for aggressive policy easing by the Federal Reserve with the focus now moving to a crucial U.S. jobs report at the end of this week.The dollar advanced to its strongest since Aug. 21 on the yen, buoyed by a rise in long-term Treasury yields to the highest since mid-August after a closely watched measure of U.S. inflation held steady, reducing the imperative for the Fed to cut interest rates by a super-sized 50 basis points (bps) on Sept. 18.It rose as much as 0.27% to 146.60 yen, and was last at 146.29.The dollar index measure against major peers edged up to 101.79 early in the Asian day, a level last seen on Aug. 20.The euro slipped slightly to $1.0430, the lowest since Aug. 19.Traders currently lay 33% odds of a 50-bp Fed rate cut this month, versus 67% probability of a quarter-point cut. A week earlier, expectations were 36% for the larger reduction.A U.S. public holiday on Monday makes for a potentially slow start to the week for the dollar, analysts said, but the rest of the days sees a steady flow of macroeconomic data that culminates with non-farm payrolls on Friday. Economists surveyed by Reuters expect the addition of 165,000 jobs in August, rising from a 114,000 increase in the prior month, and that the unemployment rate ticked lower to 4.2%.”Should the U.S. economy add 150,000 jobs or more and the unemployment rate ease to 4.2% or below, it would increase confidence that the economy is on target for a soft landing,” cementing expectations for a 25-bp rate reduction this month, said IG analyst Tony Sycamore.However, Sycamore believes recent dollar strength against the likes of the yen is unlikely to last.”The pair would need to see a sustained break above resistance at 152.00 to negate the downside risks,” he said. For the euro though, the outlook for both the Fed and European Central Bank to ease this month means it’s “difficult to make a strong case in favour or against the EUR/USD,” Sycamore added.Treasury bonds won’t trade on Monday due to the U.S. holiday, but the 10-year yield stood at 3.9110% following a 4.4-bp rise on Friday.Sterling was flat at $1.3129, holding close to Friday’s low of $1.31095, its weakest since Aug. 23. More

TOKYO (Reuters) – Japanese corporate spending on plant and equipment rose 7.4% year-on-year in the second quarter, Ministry of Finance data showed on Monday, keeping alive expectations of a domestic-led recovery in economic growth.The solid expenditure data, which will be used to calculate revised gross domestic product (GDP) figures due on Sep. 9, could support the case for the central bank to raise interest rates further in coming months.Preliminary data last month showed Japan’s economy expanded an annualised 3.1% in the second quarter, rebounding from a slump at the start of the year thanks to a strong rise in consumption.Capital spending accelerated from the previous quarter, when it rose 6.8%. It grew 1.2% on a seasonally adjusted quarterly basis.Monday’s capex data also showed corporate sales rose 3.5% in the second quarter from a year earlier, and recurring profits increased 13.2%.Capital expenditure is one of the key gauges of domestic demand-led economic growth as policymakers are counting on business investment to be an engine for the world’s No. 4 economy as exports struggle amid uncertainties around the U.S. and Chinese economies.Business spending remained firm in recent years, driven by corporate appetite for investment to offset chronic labour crunch in the fast-ageing population. More

Figures from property consultant CoreLogic showed national home prices rose 0.5% in August, slightly above the downwardly revised 0.3% rise in July. Prices, which have continued to hit record highs since bottoming out early last year, are up 7.1% from a year ago.But CoreLogic said the quarterly increase of 1.3% is now less than half the rate of growth in the same three-month period a year ago.”While seasonality may have contributed to weaker value growth through winter, affordability constraints are a key factor behind the broader slowdown,” CoreLogic’s Head of Research Eliza Owen said in a statement.Still, there is more demand for housing than supply though the market was becoming “increasingly balanced,” Owen saidRates of increase across the cities remained diverse as prices rose 2.0% in Perth, followed by a 1.4% increase in Adelaide and 1.1% in Brisbane. Sydney rose a mild 0.3%, while prices dipped in Canberra, Melbourne, Darwin and Hobart. A Reuters poll of property analysts last week showed average home prices in Australia will rise more than 6% this year, before moderating slightly in coming years. The Reserve Bank of Australia has raised interest rates by 425 basis points since May 2022 to tame inflation, but the gains in the real estate market have defied expectations, helped by record immigration and a limited housing supply.Markets are pricing in a 78% probability of an easing in interest rates by the end of the year. More

(Reuters) – A look at the day ahead in Asian markets.Investors in Asia kick off the new trading month on the front foot, optimistic about a U.S. ‘soft landing’ and dovish Fed outlook, which should help boost risk appetite and the appeal of emerging market assets.The recent slide in the dollar, falling U.S. bond yields and global equity bounce have resulted in a significant loosening of financial conditions that is fueling a virtuous cycle of increasing bullishness.Data last week showed U.S. growth beating forecasts and inflation cooling, just as the Fed is about to start its easing cycle later this month. Add in a decent Q2 earnings season, and a ‘Goldilocks’ scenario is clearly emerging.As ever though, the danger at times like this is complacency – episodes like the Aug. 5 volatility shock are always lurking, and next time the impact may not be so fleeting. And there’s also China. China’s ‘official’ purchasing managers index data on Saturday gave the first insight into how the world’s second largest economy performed in August, and it made for sobering reading – factory activity is flagging, deflationary pressures are intensifying, and the need for stimulus is growing. Manufacturing activity sank to a six-month low, contracting for a fourth straight month as factory gate prices tumbled and owners struggled for orders. Services activity picked up pace, but growth in the sector is barely visible.In fact, the composite PMI slipped to 50.1, the lowest since December 2022 when China’s economy re-opened, signaling almost no growth at all.China’s ‘unofficial’ manufacturing PMI will be released on Monday. The Caixin PMI index is expected to rise to 50.0 from 49.8, essentially moving to ‘no growth’ from slight contraction. Manufacturing PMIs from across Asia, including Japan, India, Australia and South Korea, will also be released. Traders will also be keeping a close eye on the yuan, which is its strongest level against the U.S. dollar in 15 months amid growing corporate demand for the currency and as U.S. rate cuts come into view.Overall liquidity and market activity will be lighter than usual with U.S. markets closed on Monday for Labor Day, but the backdrop generally remains constructive.According to Goldman Sachs’s indices, emerging market financial conditions are the loosest in over a year, U.S. conditions are the loosest in more than two years, and global conditions the loosest in nearly two-and-a-half years.The 10-year U.S. Treasury yield fell 20 basis points in August, the fourth consecutive month it has declined. The S&P 500 rose for a fourth straight month back to within touching distance of July’s record high, the MSCI World index did hit a new high, while the MSCI Asia ex-Japan index rose for a sixth month from the last seven.Here are key developments that could provide more direction to Asian markets on Monday:- China, Japan & others’ manufacturing PMIs (August)- Indonesia inflation (August)- Australia company profits (Q2) More

BENGALURU (Reuters) – New Zealand house prices are forecast to reverse a recent decline and rise 6% next year as interest rate cuts from the Reserve Bank of New Zealand take effect, according to a Reuters poll of property strategists.Despite aggressive interest rate rises, home prices in New Zealand are just 19% below their November 2021 peak, less than half their over 40% surge during the COVID-19 pandemic.While a sharp rise in interest rates from 0.25% to 5.50% from October 2021 to May 2023 did not result in a housing market crash, it tamed an overheating market.Average house prices fell nationally from this year’s peak of NZ$800,000 ($500,960) in March to NZ$753,000 in July, according to REINZ data.The median forecast from an Aug. 20-30 survey of 11 property market analysts estimated a 1.0% average price rise this calendar year, down from 4.5% predicted in a May poll. Forecasts ranged from -4.0% to 2.5%.That was in sharp contrast to the 6.3% gains predicted for Australian home prices this year.”While the near-term momentum would suggest house prices will remain weak in the coming months, certainly towards the end of the year and into 2025 we do expect to see a pickup in activity as the impacts of low mortgage rates flow through,” said Henry Russell, economist at ANZ. “There’s a lot of headwinds still facing the market from rising unemployment and a weaker economy. But on the flip side of that, it’s still uncertain how much of an impact lower interest rates will have on the market and whether that will see confidence return more quickly than we anticipate.”Average house prices were expected to rise by 6.0% and 5.0% next year and in 2026, respectively.The RBNZ cut interest rates by 25 basis points at its August meeting and is forecast to cut them another 50 basis points this year and 125 more in 2025. Asked what would happen to purchasing affordability for first-time home buyers in the coming year, six of eight analysts said it would improve. Two said it would worsen.”Affordability should be improving because we’ve got substantial declines in interest rates coming through. So that will be affecting the actual debt servicing costs people pay,” said Nick Tuffley, chief economist at ASB Bank. “There’s more of a mood of confidence amongst people and that’s likely to filter through into the housing market over the coming months.”(Other stories from the Q3 global Reuters housing poll)($1 = 1.5969 New Zealand dollars) (Reporting and polling by Devayani Sathyan; Editing by Hari Kishan and Louise Heavens) More

BEIJING/NAIROBI (Reuters) – China will urge a summit of 50 African nations in Beijing this week to take more of its goods, before Western curbs kick in on its exports such as electric vehicles and solar panels, in exchange for more pledges of loans and investment.But the dozens of African leaders arriving in the Chinese capital for the three-yearly event may not be easy bait. They will want to hear how China plans to meet an unfulfilled pledge from the previous summit in 2021 to buy $300 billion of goods.They will also seek assurances on the progress of incomplete Chinese-funded infrastructure projects, such as a railway designed to link the greater East African region.”The prize is going to go to those countries who have carefully studied the changes in China and align their proposals with China’s new slimmed-down priorities,” said Eric Olander, co-founder of the China-Global South Project.”That’s a big ask for a continent that generally has very poor China literacy.”Africa’s biggest two-way lender, investor and trade partner is moving away from funding big-ticket projects in the resource-rich continent, preferring instead to sell it the advanced and green technologies Chinese firms have invested in heavily. As Western curbs on Chinese exports loom, Beijing’s top priority will be finding buyers for its EVs and solar panels, areas where the U.S. and European Union say it has overcapacity, and building overseas production bases for emerging markets. China has already started tweaking conditions for its loans to Africa, setting aside more for solar farms, EV plants and 5G Wi-Fi facilities, while cutting back on bridges, ports and railways.Last year, China offered 13 loans of just $4.2 billion to eight African states and two regional banks, data from Boston University’s Global Development Policy Centre showed, with about $500 million for hydropower and solar projects.GEOPOLITICAL JOSTLING When President Xi Jinping opens the ninth Forum on China-Africa Co-operation Summit on Thursday, he is expected to pitch plugging into China’s burgeoning green energy industry to leaders from Gambia, Kenya, Nigeria, South Africa, and Zimbabwe.In attendance will also be delegates from every African state except Eswatini, with which Beijing has no ties. To avoid losing market share, China’s geopolitical rival, the United States, has started to host African leaders.Britain, Italy, Russia and South Korea have also held Africa summits in recent years, recognising the potential of the region’s young people and its 54 U.N. seats.China’s outsized role as a financial and trade partner makes its meetings a far bigger deal, however. “There is no other development partner that does that much,” said Hannah Ryder, founder of Development Reimagined, an African-owned consultancy.”But are African leaders able to push China to really dig in so that the balance of the ‘win’ is way more towards the African side?”MATCHING WANTS AND NEEDS China will want to talk up boosting trade and access to minerals like copper, cobalt and lithium in countries such as Botswana, Namibia, and Zimbabwe.But it could be cautious about more funding commitments following debt restructuring bids in economies such as Chad, Ethiopia, Ghana and Zambia, since the 2021 summit. “We are likely to see a continued prudence in terms of financing mega projects,” said Lina Benabdallah, of the Centre for African Studies at Harvard University, adding that Beijing would push for technology transfers instead.”I am most certainly keen to understand how many new finance commitments may come out of this, and how they’re going to deal with existing debt to African countries,” said Yvette Babb, portfolio manager at asset management firm William Blair. But China’s enthusiasm to lend might be dampened by security concerns, such as a spat between Niger and Benin that killed six Nigerien soldiers guarding a PetroChina-backed pipeline, or deadly protests in Kenya over tax hikes. More

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